NEW YORK--Stocks continued to sink midday, after reports of manufacturing pullbacks in the U.S. and Europe were piled on top of investor concerns over the possibility of an earlier-than-expected end to the Federal Reserve's stimulus programs.

The Dow Jones Industrial Average fell 81 points, or 0.6%, to 13846, extending Wednesday's declines. The Standard & Poor's 500-stock index gave up 12 points, or 0.8%, to 1499, as eight of 10 sectors traded in the red and growth-sensitive materials, technology and energy shares weighed. The tech-heavy Nasdaq Composite Index lost 40 points, or 1.2%, to 3125.

Blue chips posted their second-biggest drop of the year Wednesday, as investors were jarred by the potential for an earlier-than-expected end to the Fed's experimental bond-buying programs, known as quantitative easing.

Easing "has been the source of a significant boost for the equity markets," said Natalie Trunow, chief investment officer for equities with Calvert Investments, which oversees $12 billion. "The follow-through [selling] today was on the realization that there is an end to it at some point."

Stocks extended their declines after the Philadelphia Federal Reserve's February index of business activity, an indicator of business conditions for manufacturers in the region, posted a surprise decline to -12.5 from January's -5.8.

"The fact that we are seeing evidence of a continuing slowdown in the manufacturing sector is a bit concerning," said Jim Baird, chief investment strategist for Plante Moran Financial Advisors, which manages $7.2 billion in assets.

Separately, initial claims for unemployment benefits rose to 362,000 in the latest week, more than the 350,000 expected. The consumer price index for January was unchanged on the month, but increased by 0.3% excluding volatile food and energy costs.

Sales of existing homes for January showed a slight increase to a seasonally adjusted annualized rate of 4.92 million, which was mostly in line with expectations. The Conference Board's Leading Economic Index for January gained 0.2%, just below expectations of a 0.3% rise.

The weak data sent the euro down to a six-week low against the dollar. Meanwhile, the dollar sank against the yen.

Asian markets also suffered steep declines, highlighted by a 3% tumble in China's Shanghai Composite, the biggest percentage decline seen since November 2011. Exacerbating worries about the Fed easing up on its stimulus program, China's State Council said on Wednesday that it would continue with market controls to curb increases in property prices.

Dow component Hewlett-Packard was mostly flat. Its fiscal first-quarter results are to be released after the closing bell.

Carlyle Group slumped 7.6% after it missed analyst estimates for its earnings and revenue. The private-equity firm recorded lower performance fees and recorded an investment loss.

VeriFone Systems tumbled 40%. The electronic-payments company indicated that fiscal first-quarter earnings and revenue would fall well short of expectations, citing weak economic conditions in Europe and delayed projects from several major customers. It also provided a downbeat outlook for the current quarter.

Pegasystems surged 8.2% after the business process-management company reported earnings and revenue that were much better than expected. It provided a 2013 outlook that was above current projections.

Hormel Foods rose 1.7%. The company reported fiscal first-quarter earnings and revenue in line with analyst estimates and raised its full-year earnings outlook to reflect the benefit of buying the Skippy peanut-butter business last month.